Unlocking the Data Center Real Estate Investment Boom
GP How-tos
This Asset Class is Growing in Popularity — Is Your Firm Positioned to Take Advantage of It?
In late 2024, Microsoft announced plans to invest in two data centers in Germany as part of its ongoing expansion in AI infrastructure and cloud computing capacity. GPs need to know that data center real estate investment is experiencing a huge increase as companies are increasingly relying on digital infrastructure.
Data center construction is rising, and this is only expected to continue. In addition to Microsoft’s expansion in Germany, it also announced plans for a $1 billion data center in Indiana, and Meta has announced a $800 million data center in Alabama. North America, especially Northern Virginia, is experiencing a wave of data center expansion, with data center development expected to top 4 million square feet this year.
Here, we’ll take a closer look at the reasons behind this boom in data center real estate investment — and how GPs can leverage the latest technology to take advantage of this trend.
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What GPs Need to Know About Data Center Construction
First, what are data centers and why are they important? Data centers house equipment that supports digital infrastructure, digital storage, and processing. Companies are becoming increasingly reliant on data centers for IT support services, data storage, and service delivery. Cloud and Internet of Things (IoT) services continue to grow rapidly and many large businesses, like Microsoft, are utilizing data centers for their own specific needs.
Data centers house valuable equipment like computers, servers, and other important network components. There are several major companies who are investing in data centers, such as Microsoft, Amazon Web Services, AECOM and more, and demand for these asset types are increasing daily due to rising demand for data services because of AI and other technological advancements.
Data center construction is only predicted to expand, and is projected to reach nearly $270 billion by 2025. The industry is forecasted to reach nearly $350 billion by 2030. The opportunities are there for GPs, and this is clearly an asset class worth adding to your portfolio.
But as with any other asset class, alternative or traditional, you’re going to need a streamlined platform for managing it — financially and operationally. While there are many CRE platforms available, not every tool combines key financial functions with investor relations, communications, marketing, and more.
The key in any decision about using CRE technology should be how you can consolidate and streamline as many administrative tasks as possible so that you and your team can focus on what you do best: creating value for investors, managing properties with excellence, and growing revenue.
Streamline Your Data Center Real Estate Investment with Covercy
Despite the recent increase in data center construction, the sector still faces some significant challenges. These include power distribution difficulties and supply chain disruptions, specifically with critical digital infrastructure components like transformers. These challenges can mean that data center construction may take longer than initially expected, which in turn increases total overhead costs.
In spite of these challenges, success is very possible with data center real estate investment, so GPs need to think outside the box. Invest in a comprehensive project management platform that will help you streamline your operations so you don’t waste any unnecessary time and keep pace with the changes that can occur with this asset class.
Covercy is not your typical investment management solution — with its embedded banking features and intuitive investor portal, it allows you to remain connected and engaged with your investors while also leaving you time to focus on more important tasks. You can also automate your distribution payments and fundraise for your CRE deals more easily. With Covercy, we tackle the difficult administrative tasks for you so you can turn your attention to your next data center real estate investment transaction.
